Bitcoin and blockchain start-ups cashing in on cryptocurrency frenzy

The investor frenzy driving bitcoin prices to precipitous heights is playing out on stock markets as well, as companies shift focus to cryptocurrencies to get in on the latest boom.

“People are trying to surf off the wave of bitcoin by strategically changing their name,” said Jean-Philippe Vergne, co-director of the Scotiabank Digital Banking Lab at Western University. “There’s always been a strategic use of these market hype cycles.”

Hive Blockchain Technologies Ltd. (TSXV:HIVE) has been making the most of the heightened interest, announcing plans Wednesday to raise as much as $100 million to buy more digital currency mining hardware.

The financing comes after the company had already raised more than $80 million since announcing in June it was changing its name from Leeta Gold Corp. and its focus to cryptocurrencies, prompting its share price to climb from about 29 cents before its restructuring to about $3.69 midday Wednesday.

Smaller players have also jumped into the fray recently. Global Blockchain Technologies Corp. (TSXV:BLOC) was until October a thinly-traded company called Carrus Capital Corp., but with its name change and shift in focus to investing in a range of cryptocurrency opportunities its stock price has doubled and it’s trading activity is up considerably.

Block One Capital Inc. (TSXV:BLOK) was known as Essex Angel Capital Inc. until it announced in early November that it was changing its name and directing new investment capital into the blockchain sector.

The company’s share price went from about 25 cents before the announcement to a high of $1.77 in early December after it said it was buying part of a firm that had ordered cryptocurrency mining hardware. Block One has also announced a $5 million financing that it raised to $8 million on Tuesday.

While cryptocurrency startups may well provide legitimate investment opportunities, and the technology behind them provide immense potential, Vergne said part of what’s helped prop up stocks has been the limited ways to invest in the boom.

“In the past, investors had to find companies that deal with blockchain as a proxy for investing in bitcoin, because they could not invest in bitcoin in a legal, secure way on the stock market.”

Investors could have of course bought digital currencies like bitcoin itself, but unfamiliarity with the new technology, plus outages and trading delays on startup exchanges like Coinbase has made some leery of jumping in directly.

Since Sunday, though, mainstream investors have been able to buy bitcoin futures on Cboe Global Markets, while CME Group Inc. said it plans to launch bitcoin futures trading on Dec. 17.

With the increase in investment opportunities, concerns about an investment bubble and the potential fallout when it pops have grown.

“People are being attracted by the prospect of having amazing returns, and that story always ends badly,” said Jean-Paul Lam, an associate professor of economics at the University of Waterloo.

He said that while there is significant potential in cryptocurrencies and blockchains, the technology is in its infancy and the risks of a bubble in the market are very real.

“It’s the same thing that happened in the dot-com bubble in the late 1990s, early 2000s, same thing that happened with housing prices in many other countries,” said Lam.

“There will be a massive crash. No one can predict when but there will be a massive correction in prices and some people will lose quite a lot of money.”

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Cowboy Kicks, originally scheduled for May 5, will now take place Sept. 18. (Contributed photo)
Westerner Park’s Cowboy Kicks fundraiser moved to Sept. 18

A major fundraiser for Westerner Park and the Canadian Pro Rodeo Sport… Continue reading

Red Deer Rebels forward Josh Tarzwell tries to tip a point shot past Lethbridge Hurricanes goalie Car Tetachuk in WHL action Friday night at the Centrium. (Photo by ROB WALLATOR/Red Deer Rebels)
Red Deer Rebels struggles continue, drop seventh straight to Hurricanes

Hurricanes score three power-play goals in 6-3 win

Downtown Red Deer patio restaurants have been busy this summer. Contributed photo
City of Red Deer expediting patio application process for restaurants

The City of Red Deer is allowing businesses to install patios prior… Continue reading

RDC Queens forward Camryn Wallan was named the 2020-21 RDC Outstanding Female Athlete of the Year. (Photo by BYRON HACKETT/Advocate Staff)
Wallan, Podgorenko named 2020-21 RDC Outstanding Athletes of the Year

Even with the cancellation of the 2020-21 Alberta Colleges Athletic Association, RDC… Continue reading

A new Angus Reid poll says that close to two-thirds of Albertans think premier Jason Kenney is doing a bad job handling the COVID-19 pandemic. (Photo by Chris Schwarz/Government of Alberta)
75% of Albertans disapprove of Kenney’s pandemic leadership: poll

Nearly 75 per cent of Albertans believe Premier Jason Kenney is doing… Continue reading

Red Deer-South MLA Jason Stephan is among those who have signed an open letter criticizing the government’s return to stricter health measures. (Advocate file photo).
Updated: Kenney tells UCP caucus COVID-19 dissent OK, breaking health rules means expulsion

15 MLAs released letter on Wednesday critical of new health restrictions

jobs - T - 3-6-2020
Finding a job: 3 job search truisms you need to accept

A job search has many moving parts; your mindset is the most… Continue reading

Here masking tape was applied to both sides of a joint to be caulked. Peeling the tape off as soon as the caulking is smeared with a finger leaves behind a neat edge. (Photo by Robert Maxwell)
Houseworks: Unheated spaces can cause tools to rust

Q: How well do woodworking tools survive in an unheated Canadian workshop?… Continue reading

University of Victoria rowing coach Barney Williams is seen in the stands during the Greater Victoria Invitational at CARSA Performance Gym at the University of Victoria in Victoria, Friday, Nov. 29, 2019. The University of Victoria and the head coach of its women's rowing team have denied allegations of demeaning and aggressive treatment outlined in a lawsuit filed last summer by a former student and team member. THE CANADIAN PRESS/Chad Hipolito
UVic, women’s rowing coach deny former athlete’s allegation of verbal abuse

UVic, women’s rowing coach deny former athlete’s allegation of verbal abuse

Canada's Julia Grosso, right, and Wales' Natasha Harding battle for the ball during the women's international friendly soccer match at Leckwith Stadium, Wales, Friday, April 9, 2021. Canada blanked Wales 3-0 but lost captain Christine Sinclair to an injury in the fist half of a soccer friendly Friday. THE CANADIAN PRESS/AP-PA, Nick Potts
Canada blanks Wales in soccer friendly but has injury scare with Christine Sinclair

Canada blanks Wales in soccer friendly but has injury scare with Christine Sinclair

Canada's DTH Van Der Merwe, left, is tackled by Hong Kong's Toby Fenn, during the 2019 Japan Rugby Union World Cup qualifying match between Canada and Hong Kong, in Marseille, southern France, Friday, Nov. 23, 2018. THE CANADIAN PRESS/AP/Claude Paris
Canadian rugby star DTH van der Merwe enjoying life in Los Angeles

Canadian rugby star DTH van der Merwe enjoying life in Los Angeles

Team Canada skip Brendan Bottcher, right, makes a shot as second Brad Thiessen sweeps against Germany at the Men's World Curling Championships in Calgary, Alta., Friday, April 9, 2021.THE CANADIAN PRESS/Jeff McIntosh
Canada’s Bottcher heads into men’s world curling playoffs on a winning note

Canada’s Bottcher heads into men’s world curling playoffs on a winning note

Justin Rose, of England, hits out of a bunker on the seventh hole during the second round of the Masters golf tournament on Friday, April 9, 2021, in Augusta, Ga. (AP Photo/Gregory Bull)
Rose clings to 1-shot Masters lead as Spieth, Thomas lurk

Rose clings to 1-shot Masters lead as Spieth, Thomas lurk

People shop for essential items at Costco as pallets block off aisles and sections that have been deemed non-essential during the COVID-19 pandemic, in Mississauga, Ont., Thursday, April 8, 2021. Retailers in Ontario are adjusting to new lockdown restrictions with stores like grocers, discount and big box chains roping off non-essential items from underwear to calculators. THE CANADIAN PRESS/Nathan Denette
Ontario retailers adjust to new rules, non-essential goods off-limits to shoppers

Ontario retailers adjust to new rules, non-essential goods off-limits to shoppers

Most Read